Yhoo..

I personally think it's going to float around the mid to high 20s until the shareholder meeting.

Shorting June volatility seems like a good play right now. I got a fill today on 2 contracts of the 27 1/2 calls @ 1.7, so nothing big. I think YHOO will close on Friday very close to 27.5, due to option pins, and there's potential for a big (1 - 2 points) drop next Monday. At that point, I'd try to get a fill on a 22 1/2 or 25 put, and hold the short strangle till expiration.

My rationale:
There's enough optimism and people who think MSFT will come back w/ an offer to keep the stock high.

Icahn and other large shareholders who support him are trying to take over the board, this will also keep the stock high.

YHOO traded in the mid to high 20s BEFORE the deal was called off, it's unlikely they'll trade higher then the 28 - 30 range until the shareholder meeting happens.

It's unlikely MSFT is going to come back w/ an offer before the shareholder meeting (Which is July 3 by the way). Even if they do, it's unlikely they'll go higher then 33, since 31 already angered many of their shareholders. So there's some limit to the upside.

It's unlikely YHOO will come out with great news on ad revenues or what not. They were underperforming before the offer, now that employees are distracted by the MSFT-YHOO shitshow, they're getting LESS done, not more.

Any MSFT-YHOO deal will face regulatory scrutinization and will take months at minimum to complete. They will likely trade 1 - 2 points below the offer for a while. Assuming you short a 27.5 call for 1.5, and a deal is reached @ 35 / share. The stock will likely trade around 33 when it's announced, and you can get out at a loss of 4 / share. Given that a deal being completed in the next month is highly unlikely, I'm willing to take this risk.

It's unlikely another bidder will emerge with such attractive terms, or one that can outbid MSFT.

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Would I outright short the stock? No. Would I sell July volatility? Hell no.

But at this point, I think selling June volatility is a good play, as it's unlikely anything significant will happen until the shareholder meeting.

All material news events have been released. There's a slate of nominees for the board, BIG institutional support for it, and the date's been set for the annual meeting.

Going back to 22. Yahoo will accept no less than 40 dollars a share and no one will pay up that much.

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Yang won't accept $1000 / share. He doesn't want to sell the company.

If Ichan gets control of the board though, anything can happen. There's enough angry shareholders who support Ichan right now, so I most likely would not want to hold a position through the shareholder meeting.

I've got the Oct 22.50 Puts, I figure after the ugly July 3rd share holders meeting Icahn's going to dump his postion and this thing will drop like a rock.

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If you're banking on Icahn to dump his position, there's a few flaws with that strategy.

- He only has 9.9MM shares, which given the volume in the past few days, is insignificant.
- The remainder of his position is in long calls and short puts. I'm not sure where his calls are struck, but I read his puts are struck @ 19.5 and expire in 11/2010.
- Icahn fights things to the bitter end. He's ridden companies to zero, and there's been examples of him increasing his stake when the company's stock plunges (MOT is one example). If he fails to take over the entire board, he's more likely to go for a smaller prize (2 - 3 board seats) than just throw in the towel (based on his track record). Icahn has plenty of resources and money, and is actively working on multiple positions. July is not a deadline for him to finish with YHOO. (Remember, he shorted 19.5 puts that expire over TWO YEARS from now).

If you want to play YHOO on the short side, I think you'd be much better off shorting calls, credit call spreads, or outright shorting the stock (do it synthetically or w/ a single stock future, unless you can collect short interest), rather than trying to play it with a put that far OTM.

I think there's going to be enough optimism and speculation to hold YHOO up for a fair amount of time.

Quote from demoship:Yang won't accept $1000 / share. He doesn't want to sell the company.
If Ichan gets control of the board though, anything can happen. There's enough angry shareholders who support Ichan right now, so I most likely would not want to hold a position through the shareholder meeting.

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Ichan is all bark and no bite.
What can he really do?

Angry shareholders who wants to sell now ?
I think not, many are still dreaming of $100 days LOL

Angry shareholders who wants to sell now ?
I think not, many are still dreaming of $100 days LOL

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If he wins control of the board, he can do plenty, such as force a sale of the company. That's only IF he wins though. If he loses, then there's really not much he can do. If he loses the board battle, any victory is going to take a long time, and by the end of it, it'll be a Pyhrric victory anyway.

The problem is, going about this in a hostile way won't be effective. The top talent at YHOO (which is what MSFT is after) is going to leave if there's a long, drawn out, ugly hostile takeover. Which is one of the reasons MSFT is backing away for now.

If you're banking on Icahn to dump his position, there's a few flaws with that strategy.

- He only has 9.9MM shares, which given the volume in the past few days, is insignificant.
- The remainder of his position is in long calls and short puts. I'm not sure where his calls are struck, but I read his puts are struck @ 19.5 and expire in 11/2010.
- Icahn fights things to the bitter end. He's ridden companies to zero, and there's been examples of him increasing his stake when the company's stock plunges (MOT is one example). If he fails to take over the entire board, he's more likely to go for a smaller prize (2 - 3 board seats) than just throw in the towel (based on his track record). Icahn has plenty of resources and money, and is actively working on multiple positions. July is not a deadline for him to finish with YHOO. (Remember, he shorted 19.5 puts that expire over TWO YEARS from now).

If you want to play YHOO on the short side, I think you'd be much better off shorting calls, credit call spreads, or outright shorting the stock (do it synthetically or w/ a single stock future, unless you can collect short interest), rather than trying to play it with a put that far OTM.

I think there's going to be enough optimism and speculation to hold YHOO up for a fair amount of time.

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You may be right, however my thought is the only thing holding the price up now is the possible buy out, remerber this was an 18.00 to 19.00 dollar stock prior to the Microsoft offer, as the possibility of a buyout diminishes I believe the dollar value of the stock will decrease maybe not into the teens but the low twenties is certainly possible and as you said Ichan can drive this down and wait it out. However I believe I will buy the same strike puts on a monthly basis and work the spread.

You may be right, however my thought is the only thing holding the price up now is the possible buy out, remerber this was an 18.00 to 19.00 dollar stock prior to the Microsoft offer, as the possibility of a buyout diminishes I believe the dollar value of the stock will decrease maybe not into the teens but the low twenties is certainly possible and as you said Ichan can drive this down and wait it out. However I believe I will buy the same strike puts on a monthly basis and work the spread.

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Right, this was a $19 stock before the offer. But historically, after a company has a buyout offer, even if that offer is pulled and has little to no chance of coming back, the stock still stays elevated. I just don't think being long volatility is profitable. Any YHOO decline from this point on is going to be slow and gradual, not a whipsaw down.